Public Use Prevails Over Private Claims in Road Right-of-Way Dispute

The Supreme Court's 2017 decision in Hi-Lon Manufacturing, Inc. v. Commission on Audit clarifies a fundamental principle in Philippine property law: land devoted to public use, such as a road right-of-way, is property of public dominion that cannot be sold to private persons. The case underscores that a Torrens title does not shield a claimant from the government's ownership rights over public highways, even if no annotation appears on the title.

The Facts of the Case

In 1978, the government converted a 29,690-square-meter portion of an 89,070-square-meter property in Calamba, Laguna into a road right-of-way for the Manila South Expressway Extension Project. The property changed hands several times over the years—from Commercial and Industrial Real Estate Corporation to Philippine Polymide Industrial Corporation, then to the Development Bank of the Philippines through foreclosure in 1985.

In 1987, the government transferred DBP's assets to the Asset Privatization Trust for disposal. APT conducted a public bidding where the property was offered for its "useable area" of 59,380 square meters only, expressly excluding the road right-of-way portion. The winning bidder, TG Property, Inc., later sold the entire property—including the disputed portion—to its subsidiary, HI-LON Manufacturing.

When HI-LON sought payment of just compensation for the road right-of-way, the Commission on Audit disallowed the claim and ordered a refund of the P10.46 million already paid by the Department of Public Works and Highways.

The Core Issue

The central question was whether HI-LON was entitled to just compensation for the 29,690-square-meter portion used as a road right-of-way. This required the Court to determine who actually owned that portion of the property.

The Court's Ruling

The Supreme Court ruled against HI-LON, holding that the road right-of-way is property of public dominion that cannot be privately owned. The Court applied Article 420 of the Civil Code, which classifies roads and similar structures intended for public use as property of public dominion. Such property is outside the commerce of man and cannot be sold, leased, or donated.

The Court found that the Deed of Sale between APT and TGPI clearly stated the subject was the "total useable area of 59,380 sq. m." The 29,690-square-meter road right-of-way was expressly excluded. Since HI-LON acquired title only through TGPI, it could not claim ownership over more than what its predecessor validly acquired.

Statutory Liens and the Torrens System

The Court also addressed HI-LON's argument that the absence of any annotation on the titles made it an innocent purchaser for value. Under Section 39 of the Land Registration Act (Act No. 496) and Section 44 of the Property Registration Decree (Presidential Decree No. 1529), public highways constitute statutory liens that bind the whole world even without registration.

The Court emphasized that a public highway built on the property provides actual notice to any reasonable purchaser. A buyer cannot close their eyes to known facts that should put a prudent person on guard. The Torrens System cannot be used to shield fraud or to defeat the government's ownership of public dominion property.

Practical Takeaways

• Road rights-of-way are public property. Once land is devoted to public use as a highway, it becomes property of public dominion and cannot be privately owned or sold.
• Statutory liens need no annotation. Public highways are statutory liens on titles under Act No. 496 and P.D. No. 1529, binding even without registration.
• Buyers must exercise diligence. Actual knowledge of a public highway on the property defeats a claim of being an innocent purchaser for value.
• The State is not estopped by official mistakes. Government officials' erroneous offer to buy public property does not vest ownership in a private claimant.
• Contracts are construed strictly. A deed of sale's clear terms—including exclusions—will control over a party's self-serving claims of broader coverage.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.